Predicting Trend Reversals with the Zig Zag Indicator and the RSI

The speaker discusses how he uses the zig zag indicator alongside the RSI, or relative strength index, to predict a change in trend. His system is to spot a divergence between the zig zag indicator and the RSI to predict a change in trend. He discusses how he enters into a trade once he spots this signal.

First, the trader spots the divergence. Secondly, he draws a trend line between the two zig zag points used in the analysis. Once the price drops down below this trend line, he will wait for price to come back up to the upper bollinger band and then short the stock.